Citigroup Economist Saunders to join BoE's MPC

JasonDouglas

The U.K. government Friday said it had appointed Citigroup economist Michael Saunders to succeed Martin Weale as a member of the Bank of England's rate-setting Monetary Policy Committee.

Mr. Saunders will from August become one of four members of the MPC who don't work full-time for the central bank, and are known as "externals." the other five members of the committee are senior officials of the BOE.

"Michael brings a wealth of economic experience both on the U.K. and global economy and will make a strong addition to the MPC," said George Osborne, the U.K.'s treasury chief.

Mr. Saunders has worked for Citigroup since 1990, prior to which time he worked as an economist for Greenwell Montagu and the Institute for Fiscal Studies. He studied econometrics at the London School of Economics.

Mr. Weale is coming to the end of his second, three-year term on the MPC. Often regarded as a moderate hawk, he switched from advocating a rise in the key interest rate to supporting the status quo in January 2015.

Unless the U.K. votes to leave the European Union in a referendum to he held June 23, the MPC is expected to leave its key interest rate unchanged for the rest of this year. If that were to be the case, Mr. Weale would have spent six years on the committee without seeing a change in the key rate, which was last altered in March 2009.

Mr. Saunders' appointment increases the number of MPC members who have spent significant parts of their career working for banks or other financial institutions to four. Gertjan Vlieghe, the most recent recruit to the group, joined from hedge fund Brevan Howard. Governor Mark Carney and Deputy Governor Ben Broadbent have worked for Goldman Sachs.

Write to Paul Hannon at paul.hannon@wsj.com

The U.K. government on Friday said it had appointed a well-known financial-sector economist to fill a soon-to-be vacant spot on the Bank of England's rate-setting panel.

Michael Saunders Citigroup Inc's head of European economics, will take up his post Aug. 9, the U.K. Treasury said in a statement.

Mr. Saunders will be one of four "externals" on the BOE's nine-member Monetary Policy Committee, economic experts drawn from outside the central bank's ranks. He will replace Martin Weale, who is approaching the end of his second and final three-year term on the panel.

Mr. Saunders spent more than 25 years at Citi after stints at the Institute for Fiscal Studies, a nonpartisan London think tank, and Greenwell Montagu, a London securities broker that eventually became part of HSBC Holdings Inc.

"Michael brings a wealth of economic experience both on the U.K. and global economy and will make a strong addition to the MPC," said George Osborne, U.K. treasury chief.

Mr. Saunders will join the MPC potentially at a tricky time. Like other central banks, the BOE is grappling with low inflation and patchy growth in the world economy, but is also navigating the economic ripples caused by a coming referendum on the U.K.'s membership of the European Union.

Britons are due to vote on June 23 on whether to keep the U.K in the EU and BOE officials said this month that uncertainty about the result is clouding the economic outlook and causing companies to delay hiring and spending decisions.

A vote in favor of quitting the bloc could cause short-term upheavals in financial markets, analysts say, while economists warn that any uncertainty over the U.K.'s future access to the EU's single market could hurt trade and investment. That might complicate the MPC's policy decisions; already officials have said they would offer banks extra cash in the weeks surrounding the vote to see off the threat of financial-market disruption.

Proponents of quitting the EU have dismissed such warnings as scaremongering, saying the U.K. will ultimately be better off if it forges its own trade deals and sets its own business regulations outside the 28-member bloc.

Mr. Saunders' appointment brings the number of MPC members who have spent significant parts of their career working for banks or other major financial institutions to four. Gertjan Vlieghe, the most recent recruit to the panel, joined from hedge fund Brevan Howard Asset Management. Governor Mark Carney and Deputy Governor Ben Broadbent have both worked for Goldman Sachs Group Inc.

Mr. Saunders has a reputation for making punchy forecasts, suggesting that he's likely to display the independence of thought that external MPC members are prized for by lawmakers in parliament who scrutinize the BOE's record. In January 2013, he took a gloomier view of the British economy's prospects than many of his peers, saying that he thought it possible the BOE would eventually increase the size of its bond-buying program to GBP450 billion ($637 billion) and wouldn't raise its benchmark interest rates until 2017.

In the event, officials stopped their bond buying when their portfolio reached GBP375 billion, but still appear to be some way off raising their benchmark rate from 0.5%, making Mr. Saunders' call appear prescient.

In a research note published Tuesday, he detailed his latest thoughts on inflation in the U.K. Mr. Saunders wrote that his forecasts for annual consumer-price inflation are "markedly to the upside" of the BOE's.

Mr. Weale's departure will deprive the MPC of one of its more hawkish members, as he has during his term occasionally advocated an increase in the BOE's benchmark rate against the consensus of his colleagues. But he has just as often dropped that call whenever fresh data has emerged to challenge his view; he voted this month to keep the BOE's benchmark rate on hold.

Mr. Saunders was one of the first professional economists to get a chance to question Mr. Carney publicly on policy. He surprised the newly-minted governor by turning up with a query at his maiden speech in 2013 in Nottingham, England. Mr. Carney dodged the question and shot back with one of his own, asking Mr. Saunders if it was his first time visiting the city.

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